Second-mortgage options for Arizona homeowners

A second mortgage can let you use home equity while keeping your existing first mortgage in place. Here, we focus on a closed-end home equity loan: money received as a lump sum, with a separate repayment schedule.

Home equity loan or HELOC?

Both can be second mortgages. A home equity loan provides a lump sum and usually has a fixed interest rate, although adjustable-rate options exist. A HELOC is a revolving line you can draw from over time and usually has a variable rate.

A known renovation budget may call for a different structure than expenses spread across several years. Compare the actual loan terms, rather than choosing by the product name alone.

Does it change my current mortgage?

A separate second mortgage does not replace the first loan or reset its rate. It adds another debt and payment obligation. If you later refinance your first mortgage, the second lender may need to agree to remain in second position, or the second loan may need to be paid off.

Compare the full borrowing cost

• The new payment alongside your existing mortgage payment.
• Rate type, closing costs and any prepayment or early-closure charges.
• Total interest over the expected time you will keep the loan.
• How the loan affects a planned sale or future refinance.

For illustration, a $500,000 home with a $350,000 mortgage has $150,000 of equity before other liens. That does not mean all $150,000 can be borrowed. The lender determines the available amount using its requirements and your application.

Start with your existing mortgage

Bring your current balance, rate, estimated home value and borrowing goal. I can help compare a home equity loan, HELOC and refinance options. Approval and terms depend on the lender and your circumstances. Because the debt is secured by your home, missed payments can put the property at risk.

Discuss your second-mortgage options with Dan.

Sources: CFPB home equity loan guide and refinancing with a second lien.